Loans for homes

HIMALAYAN NEWS SERVICE

KATHMANDU: The increase in individual incomes and the desire to own a home is leading to a slow but steady growth of clients of home loans. The facilities and services offered, though, have yet to match up — particularly due to the lack of client-friendly policies. Agreeing

to this fact, Upendra Poudyal, vice president of Nepal Bankers Association, says, “Although the number of home loan seekers hasn’t increased as expected, there is certainly a remarkable growth.”

The latest data for June-July also shows a positive development in the land and housing sector. Poudyal, also the CEO of NMB Bank, maintains, “The major reason people are not

purchasing houses as per our estimations is because potential home buyers are still withholding their investment in property, expecting the prices to further recede.” He opines that to boost the realty sector and change its stagnant scenario, all the stake-holders — bankers, developers and government — should work in tandem with each other. Poudyal adds,

“Potential home buyers are also deterred by the fact that banks and financial institutions (BFIs) have not lowered interest rates for home loans, prices of individual homes have become unaffordable, and the government is not deducting tax in income taxable amount in EMIs.”

According to Poudyal, if the government deducts the tax in EMI installments, developers construct low-end homes targeted at middle-class and lower-middle class clients and bankers provide home loans at lower interest rates, then customers could afford to purchase houses and the whole industry will be mobilised into action. Optimistic about the current fiscal year, Poudyal says, “The scenario this year is promising, as genuine home buyers will not wait for next year to invest in houses.” As the major chunk of home seekers are professionals and salary-based, he opines that the government could boost their confidence and purchase

capacity by implementing the system of interest only loan — or paying back merely the interest for certain time period.

Commenting on the state of home loans, Sashin Joshi, CEO at NIC bank, says, “There are no

particular changes in the home loan facility, perhaps due to the uninspiring political and economic scenario.” Stating that the home loan service is beneficial to professionals and salary-based middle-class clientele, Joshi says, “Home loan facility has great

potential in the Nepali market, but the industry hasn’t been able to tap it fully yet.”

Contrary to the other opinions, NIC Bank has reportedly witnessed considerable growth in the

fiscal year 2011-12 compared to the last one. According to the bank, clients are taking loans on the basis of requirements rather than speculation, which is quite good in terms of business. The main increase in clients is because of remittance, as the families relying on it are eager to purchase houses, especially in the urban areas.

Easy banking access has also played a role in expanding this sector. On average, loan seekers deal in amounts between Rs 2.5 million to Rs three million. “As the demand is on need basis, low-end houses, in the range of Rs 5.5 million, are most preferred,” a source at the bank

informs. Stating that previously people only dealt in home loans to invest in second properties but now even first time buyers are taking the loans, the source says, “It is a positive sign and increases the potential of home loans. We are hopeful that we will receive a considerable

number of applications for home loans during the current fiscal too.”